May 12, 2014 From the President

What Can We Learn from A Spend-Down Strategy? Much Indeed!

pathways-cover-enWhile most foundations are set up “in perpetuity”, some private foundations choose to spend down, that is to give away all of an endowment by a specific time (either before or after the donor’s departure). The most famous spend down foundation of course is probably the Bill and Melinda Gates Foundation which will be out of business by 50 years after the deaths of its founders. But not too many donors emulate the Gates. According to the Foundation Center, anywhere between 8% and 12% of US foundations have made this decision. It seems reasonable to suppose that such might be the case in Canada as well. Among Canadian foundations that have chosen this route, you would find the Kahanoff Foundation of Calgary, and the Andrea and Charles Bronfman Philanthropies in New York and Montreal. Last October PFC heard from Diana Leat on the lessons of spending down at the Diana, Princess of Wales Fund in the United Kingdom. Is there a trend towards more spending down? Some observers speculate that new entrants to the foundation field, particularly those of the baby boom generation, are more likely to want to spend down because they feel a sense of personal engagement and urgency to make a difference and are less motivated by creating a generational family legacy. This remains to be seen.

Given that few foundations do spend down quickly (or even slowly), why should we pay attention to spend- down examples and strategies? This is a question asked by the Bridgespan Group recently, and they make an interesting point. In an October 2013 report, Six Pathways To Enduring Results: Lessons From Spend Down Foundations they suggest that the decision to spend down brings greater clarity and focus to the grantmaking. A foundation with a deadline has a motivation to use its money wisely, and to be disciplined about its approach. Perhaps more foundations should learn to “think like a spend-down”? Bridgespan notes that “nearly every philanthropist regularly decides to exit certain strategies or causes, and thus has the opportunity and responsibility to think with the self-imposed discipline and acute focus of a spend-down” donor.

So what can we learn from thoughtful spend-down philanthropists? Bridgespan suggests that examining specific case studies helps to identify the pathways to results that these motivated philanthropists have followed. Their short report identifies six pathways and provides for each an illustrative if very brief case study. All the pathways indeed would be familiar to any thoughtful foundation board or staff: a) invest in people; b) invest in institutional capacity; c) influence other donors; d) fund proven programs; e) support pioneering research; and f) change public policy. These pathways are not mutually exclusive although pursuing all six at a time wouldn’t lead to best results. Choices are influenced, as in any strategic choice, by values, data and resources, and there isn’t any formula. The point is that foundations with shorter time frames tend to think carefully about their strategic choices and this has helped them maximize chances of achieving lasting social change. This point is well made in the lessons shared by the Diana, Princess of Wales Memorial Fund in its report A Funder Conundrum.

So thinking like a “spend-down” and learning from their strategies could be very useful for most so-called “perpetual” foundations. We could use more shared lessons from Canadian spend-downs. The Andrea and Charles Bronfman Philanthropies have been documenting their spend down decisions and experiences and sharing them as they go through Grantcraft. If any Canadian foundations are taking this step, it would be of huge help to the field to have them share their learning and results. Are you considering a spend-down strategy? Let us know. PFC is interested in your experience!

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